A company produces paint which goes through two operations, operation A and operation B, before it is complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for Department B based on machine hours is $4.00 per machine hour.
$$\begin{array} { l c c }
& \text { Department } & \text { Department } \
& \mathrm { A } & \mathrm { B } \
\text { Machine hours } & 50,000 \mathrm { MH } & 60,000 \mathrm { MH } \
\text { Direct labor hours } & 78,500 \mathrm { DLH } & 100,800 \mathrm { DLH } \
\text { Overhead costs } & \$ 392,500 & \$ 403,200
\end{array}$$

Question

A company produces paint which goes through two operations, operation A and operation B, before it is complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for Department B based on machine hours is $4.00 per machine hour.
 $$\begin{array} { l c c } 
& \text { Department } & \text { Department } \
& \mathrm { A } & \mathrm { B } \
\text { Machine hours } & 50,000 \mathrm { MH } & 60,000 \mathrm { MH } \
\text { Direct labor hours } & 78,500 \mathrm { DLH } & 100,800 \mathrm { DLH } \
\text { Overhead costs } & \$ 392,500 & \$ 403,200
\end{array}$$

Quizplus · Accepted Answer

The departmental overhead rate for Department B based on machine hours is calculated by dividing the overhead costs by the machine hours: $403,200 / 60,000 MH = $6.72 per machine hour, not $4.00.

A Company Produces Paint Which Goes Through Two Operations, Operation